The ABN AMRO Energy Monitor of July has found that the impact of Iraq tensions on oil prices will be limited for the time being to an increase of just a few dollars.

The Islamic State in Iraq and Syria (ISIS) has occupied a large part of northwest Iraq, which is OPEC’s second-largest oil producer. However, Iraq accounts for only 3% of global oil production, which is more than 90 million barrels a day.

The militants took control of Iraq’s northwest part, and oil production in the region had been halted a few months ago after an earlier attack. Oil exports are currently coming from Basra in the southeast of Iraq on the Persian Gulf.

ABN AMRO found that oil production and exports have continued unabated in the south of Iraq since the unrest increased in mid-June and production in May and June was at its highest level in over a decade.

The company said that the general expectation is that the predominantly Sunni rebel movement will encounter much more resistance once it tries to occupy areas controlled by either the Kurds or the Shias. There is less chance of this and it is not clear whether ISIS is even out to occupy the oilfields in the southern part of Iraq.

The company noted that neighbouring oil producers and the international community, particularly the US, will not allow ISIS to gain control of the capital Baghdad and the large oilfields in the south.

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ABN AMRO said that even if ISIS takes control of Baghdad, the move would not have an immediate impact on oil production, although it might trigger increased market unrest.

Energy